Today, many companies have implemented some form of accounting Shared Services (the definition of Shared Services being the centralization of “back office” support services).
Some examples include: General Ledger, Accounts receivable, Accounts payable, Capital and fixed assets, Cost accounting and Balance sheet reconciliation and other stewardship responsibilities.
As has already been well documented by organizations such as the Institute of Management Accounting (IMA), Shared Services & Outsourcing Network (SSON), and Shared Services Link the benefits of creating Shared
Services are: Lower cost (sometimes as much as 40% savings if work is offshored or outsourced), Better quality via standardization, Faster processing of the data and Better stewardship, ie. SOX compliance
To stay competitive in today’s marketplace companies need to leverage Shared Services beyond just accounting. This article focuses on taking Shared Services to the next level, i.e. moving to a Global Business Services organization, where a company can achieve the same kind of cost, quality, speed and stewardship benefits across a broader set of back office activities.
From Shared Services to Global Business Services
To expand from a Shared Service structure to a Global Business Services (GBS) organization requires identifying which work processes in other functions would be good candidates. The key characteristics of work processes that would benefit most from a GBS structure are:
• A large number of transactions where a high level of local interaction is not required.
• The transactions are something that all or most of the Business Units (BU’s) utilize.
• The activity within a work process is similar (or should be similar) across BU’s.
• The opportunity exists to leverage technology to drive improvements in cost, quality and speed.
• The P&L risk to the business is low if anything should go wrong.
As mentioned previously, standardizing policy and work processes in other functions and consolidating this work into one organization can result in significant improvements in cost, quality, speed and stewardship. In addition, though, moving to a GBS organization can also deliver the following benefits:
• Driving more end to end process improvements. For example, many HR processes end up impacting the accounting books (payroll, benefits, etc). By having the HR processes in the same GBS organization as Accounting, the two groups can work together to better integrate their systems and reduce the number of human “touches” as the data is processed.
• Using the same service center locations allows the organization to better leverage its scale, i.e. reduce overall site costs, including internal IT, F&A and HR support.
• Leverage common tracking/scorecarding systems to drive a consistent customer service culture.
Moving Work Into Global Business Services
In applying the above criteria to other functions, the following are some work processes that are often excellent candidates to move into a GBS organization.
• Cash management
• Intercompany accounting
• Tax compliance and reporting
• Internal audit
• Transactional or back office support for financial planning & analysis
• Payroll processing
• Compensation administration
• Hiring and recruiting
• Car fleet management
• Processing travel and entertainment expenses
• Relocation services
• Benefits administration
• Pension administration
• Processes related to the tracking and development of internal talent
• Core company training
• Distribution and support of all desktops, laptops, company phones and other portable devices
• Running the data center(s)
• Application development and maintenance of all systems
• Firewall security
• Network support
• Oversight of other third parties who are providing services, ie. local telecom companies
Facilities & Real Estate
• Operations and maintenance of current facilities
• Identification and negotiation of any new space
• Selling off or subleasing any underutilized space
• Oversight of other third parties who are providing services to the facilities, ie. food services, security, cleaning, utilities, etc.
• Leveraging spend pools that cross multiple Business Units or regions, and thus would benefit from further economy of scale, ie. certain raw or packing materials, vendors utilized by the GBS organization, etc.
• Tracking and administration of all major contracts
Environmental, Health & Safety
• Internal auditing
• Compliance tracking and reporting
• Resolution support
• External relations
• Consumer relations
• Internal communications support
• Video services
• Document preparation
• Vetting of contracts
• Litigation support
As with Accounting, the decision will also need to be made about whether to onshore vs. offshore vs. outsource each of these work processes. And similar to Accounting, the more simplified and standardized the work process, the easier it is to outsource, which usually translates into larger savings, greater flexibility, and frees the GBS organization to focus its internal resources on where it can add the most value.
To be clear, if any of the above work is outsourced, the Company still retains responsibility for creating and maintaining all of the associated policies, and for governing the external vendors who are administering those policies. The governance role is particularly important. Somebody within GBS always needs to be accountable for each of the services being provided by the organization, and also manage the overall relationship with any associated vendor(s), i.e. resolve any differences, track performance, look for opportunities to broaden the relationship where it makes sense, etc. So whenever a service is being outsourced, be sure to maintain an internal governance role so as to ensure the company is receiving the full value from the relationship.
Many companies have implemented Shared Services groups, usually starting with their accounting organization, and they have achieved significant benefits in terms of cost, quality, speed and compliance. To truly drive step change improvement and stay ahead of competition, companies need to be looking at how they can leverage their Shared Services organization even more broadly.
To do that, the company needs to identify work processes in other functions that would also benefit from moving to a Shared Services structure. In other words, move from just a Shared Service structure to a Global Business Services organization. In addition to driving improvements in cost, quality, speed and compliance, moving these other functional work processes into one GBS organization will allow that organization to better leverage its scale, as well as work as one team to drive end to end improvements in all of the services it provides to the Company.